Domino's Pizza Group starts year with UK like-for-like sales miss

(Reuters) - Domino's Pizza Group PLC (DOM.L), Britain's biggest pizza delivery firm, reported lower-than-expected like-for-like sales in the UK for the first nine weeks of 2017, sending its shares down more than 14 percent.

Sales at its stores open for about 2 years rose 1.5 percent during the period, but were well below the 10.5 percent increase it posted in the same period a year ago.

Higher competition from Pizza Hut, market softness and an unsuccessful "Winter Survival" promotion campaign hurt the like-for-like sales, analysts said.

Brokerage Peel Hunt had forecast like-for-like sales to rise 3 percent, while N+1 Singer had estimated a 3.5 percent increase.

However, the company said its full-year profit rose 17.1 percent, driven by a surge in online and mobile orders.

Domino's also said on Thursday that it bought Norwegian pizza chain Dolly Dimple's from Norges Gruppen for an enterprise value of 4 million pounds ($4.9 million) through its associate Pizza Pizza Norway.

Domino's plans to integrate the Dolly Dimple's business into their operations in Norway, which currently has 12 operating stores. The combined operation will have around 50 stores by the end of the year, Domino's said.

The company has been focussing on sales through online channels to compete better with food delivery company Just Eat (JE.L), which said on Tuesday that it expected another year of material growth.

The company has managed to stay ahead of competition by effectively using technologies such as digital wallets and apps for smartphones and smartwatches that help customers place and pay for orders quickly.

Domino's said U.K. online system sales accounted for 72 percent of all delivered sales, up from 67 percent in 2015. Mobile sales were 73 percent of online system sales.

The company said it expected to open around 80 new stores in the UK and invest in additional supply chain centres in 2017.

The group, which has most of its stores in the UK but also operates in Ireland, Switzerland and Germany, said underlying pretax profit rose to 85.7 million pounds in the 52 weeks ended Dec. 25 from 73.2 million pounds a year earlier.

Sales at UK stores open for about 2 years rose 7.5 percent in the period.

The company, which is a master franchisee of U.S. group Domino's Pizza Inc (DPZ.N), said system sales rose 14.5 percent to 1 billion pounds.

Last week, Domino's Pizza Inc, the parent group of Domino's in the U.S., reported a better-than-expected rise in revenue for the fourth quarter.

Shares in the company were down 11 percent at 349 pence at 0934 GMT, after touching a 3-1/2-month low earlier.

($1 = 0.8225 pounds)

(Reporting by Rahul B and Arathy S Nair in Bengaluru; Editing by Sunil Nair and Gopakumar Warrier)